RIGA - TeliaSonera's woes in the Baltics continue to deepen, as the state auditor has launched an audit into the legal costs involved in the arbitration case between Lattelekom's two owners - the state of Latvia and the Swedish-Finnish TeliaSonera - on the basis that Lattelekom may have covered some of the costs.
The state's chief auditor, Raitis Cernajs, announced on July 2 that the probe would determine what legal costs were covered during the case, which ended in a settlement in March, and whether these costs were justifiable.
"Money was spent on both sides for the case - Latvia on the one side and Lattelekom on the other. That's actually out of the ordinary, I think, if not absurd. Lattelekom spent huge amounts of money, and who in the end got the benefit?" said Cernajs.
The state audit department will launch the probe in August after most of its staff had returned from summer vacation, he said.
News of the audit demonstrated the tenuous relationship between the government of Prime Minister Indulis Emsis and TeliaSonera. Since assuming office in March Emsis has repeatedly criticized the out-of-court settlement between the previous government and TeliaSonera, claiming that the Scandinavian telecommunication company got all the benefit.
Lattelekom is 51 percent owned by the Latvian state and 49 percent owned by TeliaSonera.
In fact, on July 5 Emsis signed an agreement to publish both the settlement and the accompanying memorandum that were singed on March 3. Previously both have been kept confidential and therefore fueled speculation as to the insider-nature of the settlement, reached in the last days of the Einars Repse government.
Lattelekom President Gundars Strautmanis would not comment on the possible audit, saying only that the company had not yet received information from the state auditor. He added that state auditors had audited the company many times and the last check has not been completed.
Latvian Privatization Agency specialist Guntis Karklins said that the agency has received a letter from auditors and that the agency was willing to help any way it can. He said that the state's costs in the Lattelekom case were covered by the Privatization Agency.
Emsis' press secretary, Ilona Lice, said that the prime minister had received the previous report from the state auditor's department and did not find anything related to Lattelekom paying for legal fees. Nevertheless, if anything similar was established, then the case should be handed over to prosecutors and the anti-corruption office.
In 2000 an international legal battle was launched by Tilts Communications, then a 49 percent Lattelekom owner and controlled by TeliaSonera, against the state of Latvia, claiming 80 million lats (119 million euros) compensation for curtailing Lattelekom's monopoly rights by 10 years to 2003 in order to make way for EU regulations.
The state later filed a counter claim demanding 600 million lats from Tilts Communications since, in the government's estimation, the investor had not fully carried out modernization of the company's fixed-line network as provided in the original agreement.
In March this year the two sides reached a settlement, according to which Latvia received 1 million lats to cover legal expenses, while total costs to the state of Latvia allegedly reached 16 million lats.
